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2011 (8) TMI 769 - HC - Income TaxPermanent Establishment(PE) - Dependent agent - Whether in the facts and circumstances of the case, the ITAT grossly erred in holding that ANR should be regarded as a Dependent Agent Permanent Establishment of the Appellant under the Article 5(8) of the DTAA between India and Singapore on the premise that ANR habitually secures orders wholly and mainly on behalf of the appellant? - held that:- The question whether ANR has income from other clients as well and the extent of such income is very relevant to decide as to whether the criteria stipulated in Article 5(9) is satisfied or not. Since the Assessing Officer did not look into the matter from this angle and the ITAT also disposed of the issue deciding against the assessee on wrong premise, we are of the opinion that for this limited issue matter needs to be remanded back to the Assessing Officer. The Assessing Officer shall decide the question of applicability of Article 5(9) as to whether the ANR was providing services to companies other than the assessee as well and had substantial income from those other companies and whether the company stipulated in Article 5(9) namely ANR was wholly or almost wholly working on behalf of the assessee will have to be determined afresh by the Assessing Officer. Whether in the facts and circumstances of the case, the ITAT grossly erred in concluding that ANR has not been compensated at arm's length price, without adequate basis to arrive at such a conclusion? - held that: - the assessee could dictate the terms of the payment by altering the same and reducing it to the US$ 40,000 per annum from 5% of invoice value when assessee found that on the basis of 5% total commission payable could be much higher. This clearly leads to the inference that the assessee was in a position to dictate the terms and in the absence of any Transfer Pricing Analysis by the Transfer Pricing Officer in the instant case, it cannot be said that such commission could fit the description of "reasonable profits" within the meaning of Article 7(2) of DTAA. - it also needs to be highlighted that no plausible or justifiable reason is coming forthwith for changing the commission from 5% of the invoice value to US$40,000 per annum. - Decided in favor of revenue.
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